Protesters across the nation (and the world) are expressing their rage, anger, and frustration at the killing of George Floyd and so many others at the hands of police in the United States. I have no issue with the rage against injustice – I have written about how over 20% of all random homicides in the United States are committed by the police! But as I watch events unfold, my instinct is to try to grasp for solutions. The protesters ask for the arrest of all involved officers – but surely this anger, this protest, can further be channeled toward institutional change? Protests and movements end, and without actionable demands, they often end empty-handed.

Here’s a simple actionable demand to make of both President Trump and Democratic Presidential Candidate Joe Biden:

Direct the Department of Justice to instruct police departments that they will receive $0 in federal funding if they hire any officer previously terminated or disciplined for killing a civilian:

If any officer has been involved in such an incident, and is terminated, disciplined, they should be placed on a Department of Justice list. If a jurisdiction pays out a civil settlement with respect to an incident involving an officer, the officer’s name should likewise be placed on the list.

Any police department continuing to employ officers listed should no longer be eligible to receive any federal funding or benefit of any kind.

In economics, we often talk about how incentives drive behavior. The federal government does not directly control the 18,000 law enforcement agencies in the United States – but changing the incentives will change their behavior. No department wants to risk its grant funding, its equipment donations, or other federal support. While everything is politicized these days, this need not be a political football – who wants bad police on the street? If a doctor losing his medical license in one state is unable to practice in another, why is a police officer fired for misconduct able to be re-hired in the same state? I don’t think most police officers want to work with the small minority who engage in criminal conduct either – so this is a simple step to cleaning up law enforcement across the country.

If, as a people, we want real change, let’s come up with concrete solutions. This is my attempt to do that – I hope we can channel the rage on the streets toward solutions, so we don’t find ourselves in the same place in another decade’s time.

Update 5/31/2020 – It’s been two months exactly since this post. Some aspects have aged well – US deaths to date did in fact peak around 2500 per day, and the rate of death has declined substantially since. The notion that we’d stay below 100k deaths overall has not, however. I believed that the opportunity created by April shutdowns would be used to ramp testing 10x, and that mask usage might dramatically increase. It now appears that the US is instead focusing on a vaccine as the only solution, with ongoing deaths the price paid for an unwillingness to wear masks or test aggressively.

Original Post – 3/31/2020

With the steady drumbeat of negative news, it’s easy to slip into despair about the state of the nation and the world. The present moment has enabled journalists and well-meaning prognosticators of all sorts to shout out the depth of our peril. While the danger is real, I’d like to take a moment to point out a myriad of reasons why the Coronavirus pandemic may end in something less than the worst case outcome (for the skeptical, you will find ample sourcing along the way).

Italy entered a nationwide lockdown on March 9th, and the positive results of this action have become evident over the last 10 days (roughly two weeks after lockdown). Worldometer’s Coronavirus charts tell a striking story – new Coronavirus cases as of March 30th are below that of March 19th, and total daily deaths remain below the peak set on March 27th. While the trend could yet reverse, this follows the path set by China in which strong lockdown measures resulted in a drop in new cases a bit under two weeks later. If Italy’s trends continue, coronavirus should become less lethal in the country once the curve is sufficiently flattened and hospital capacity is again able to deal with all critically ill patients.

US Favorable Metrics Relative to Italy (and China):

The US has the dubious distinction of having the world’s most Coronavirus cases, but we also have quite a few factors working in our favor. Let’s walk through each and then apply an Italy-style scenario to the US:

The population density for the lower 48 is roughly 329M / 3.1m sq miles = 106 people/sq mile, versus 533 people / sq mile in Italy. This is not a linear factor as populations are grouped into much denser metro areas, but in general metro area density in the US is still much lower than in Italy.

22.7% of Americans are above the age of 60, versus 29.8% of Italy. Since the vast majority of Coronavirus deaths are of those beyond the age of 60, this factor alone should reduce America’s risk by 25% relative to Italy.

There is some earlystatistical evidence that sun, warmth, and absolute humidity might reduce the spread of Coronavirus. According to these models, the later onset of the outbreak in the US and warmer climate (relative to northern Italy in early March) could prove ameliorating.

Results of testing every individual in the village of Vo, Italy revealed that for every positive test in a broader population, up to 10 times as many individuals may have contracted the virus. These kinds of results indicate that the mortality rate might stabilize below the current 1% estimate.

Over 50 different drugs or treatments are currently being investigated – the worst case scenarios imply that all of these treatments fail or are so delayed that they prove ineffectual.

Summing it up, what’s the potential outcome?

Since the US has now instituted many of the measures put in place in Italy and elsewhere, let’s assume that we follow Italy’s lead. President Trump extended initial “social distancing” guidance on March 16th, but most of the US did not follow suit until March 23rd (when restaurant, school, and other closures became widespread).

Italy started a full lockdown on March 9th as noted earlier, roughly 14 days before the US entered a partial lockdown. Let’s assume that the US didn’t achieve anything approximating full lockdown until March 30th – this would place the peak of the epidemic in mid-April, following the Italian pattern of a 2-week delay. Italy appears to have peaked under 1,000 deaths per day – this would equate to roughly 5,000 deaths per day in the United States if conditions were equivalent. As mentioned earlier, age distribution alone lowers risk by 25%. US density is 80% less than Italy, but let’s assume this reduces peak impact by less than half that, taking our overall risk relative to Italy down to 50%. This would imply 2500 deaths per day at peak.

Italy sustained roughly 4,000 deaths prior to hitting the current plateau March 20th – if they remain at these levels for 30 days before descending, that would lead to another 30,000 deaths, followed by another 4,000 if the descending phase mirrors the ascent. This would represent a conservative outlook relative to China, which stayed on a plateau near peak death rates for only two weeks.

If the United States follows Italy’s lead, we might experience 8,000 deaths climbing to the peak, 75,000 deaths on the peak plateau (30 days at 2500 deaths/day), and a similar number on the way down – for a total number of deaths just under 100,000. These estimates assume the net positive impact of climate, treatments, and lower mortality rates is zero.

Does this sound like fantasy? Italy is already beginning to look optimistic that it is turning the corner, with new cases down from the peak – and it’s quite possible that the United States is just a few weeks behind, provided we keep the doors shut, stay at home, and let the storm pass, while we get our testing and treatment capabilities ramped up.

I last posted about a business idea for an automated college counselor, one which would guide students to make better college and career choices. I can now announce that Schools-Over.com has launched in beta, and attempts to deliver on that goal!

School’s Over currently provides two core features: a search feature for high-value degree programs, and a comparison tool enabling students to enter their current admissions offers to see which offers the best lifetime value*.

Much of the data for School’s Over comes from the Department of Education’s College Scorecard program, which has built a solid application for exploring the DOE’s newly released data on graduate salaries by college program. School’s Over uses this data and extends it by projecting salaries for the 70% of programs lacking salary data. School’s Over also projects total Lifetime Value for each degree, so that students know at a glance whether a college program is worthwhile, or whether it’s a debt trap.

With the beta launch we’ve taken an initial step toward providing automated guidance counseling – please try it out and give us your feedback (use the green feedback button onsite).

*Lifetime value for a college degree is defined as the NPV over a 45 year career, taking into account the cost of tuition, the opportunity cost of lost wages during college, and the net after-tax difference in wages realized by graduating from a particular college program versus simply going to work after high school. The discount rate used in the NPV calculations is the average federal student loan rate, currently just below 6%.

Idea: GuideMe – an automated guidance counselor that helps students make better college and career choices

MVP: Too many students in the US leave college with too much debt and no realistic career path – in part because guidance counseling is a luxury at many American high schools. GuideMe will help fill this void, using students’ interests and strengths to show each student the college or vocational programs that will help them achieve their goals. GuideMe will also help students evaluate admissions offers to determine the best choice in terms of career ROI, taking into account both costs and future income.

Market: US high schools average one guidance counselor per 500 students, leaving most students with no career guidance except what’s available via friends, family, and the internet. In this vacuum there’s a tremendous opportunity to help students and families make better choices, with better careers and less debt the end results.

From a business model perspective, students and high schools have limited resources, but employers have a substantial recruiting need, and a successful app could funnel qualified candidates into positions at a far lower cost than traditional means of recruiting. There are over 150M working Americans, 100M of whom lack a college degree. The vast majority of that 100M employees might benefit from vocational training and placement services – almost 50% of employees change jobs annually. If the value of placing an employee is conservatively estimated at $1000 (versus the 20-25% of salary typically paid in white-collar recruitment), this leads to a total addressable market as large as $50B. [1]

Idea Score (0-10 scale): 8 points

Feasibility of MVP / Market Entry (out of 2): 2

The GuideMe MVP would leverage data on salaries and tuition published by college programs in order to determine career ROI, adjusting each career path for projected future changes. Much of this data is either publicly available or can be licensed, but it may need to be refined newer or non-traditional careers.

GuideMe would then determine the highest ROI programs for a student, based on their GPA, test scores, and interests. Virtually all of the data needed for the MVP is publicly available, though career ROI estimation algorithms vary – given my experience building HiddenLevers, this should be a competitive advantage.

Revenue Market Size (out of 4): 4

As noted above, the total market opportunity in the HR recruitment space, taking into account only the under-served vocational market, is conservatively estimated at $50B per year.

GuideMe’s principal issue is that the initial platform rollout is devoid of any revenue generation plan – users in the cost-conscious student market are unlikely to adopt a paid guidance product. GuideMe instead intends to roll out a full-featured free product, while developing a placement product for employers requiring specific skillsets. GuideMe will be well positioned to match capable students with employers, enabling higher volume placement at a lower cost to businesses.

The challenge in building a two-sided marketplace style product is well known, but the returns to success can also be extraordinary.

Difficulty, Barriers to Entry, and Competition (out of 2): 1

Many sites and apps exist to provide guidance in aspects of the college decision process, but none provide comprehensive career guidance, and none utilize the concept of career ROI.

Existing competitors like MyKlovr are attempting to solve aspects of this problem, but appear to be focused on paid software approaches, which will limit growth potential. There is substantial risk involved in building a free guidance product, and then working to link it to employment placement, but this approach is likely to capture the largest number of users in a space where massive scale is possible.

Riding Hype or a Trend (out of 2): 1

At present there seems to be little focus on this market – but if scale can be achieved among the 20M students in US high schools, then building a funnel to employers should become relatively straightforward. Very little has been done to improve the functioning of the middle of the US job market in particular – the rewards are too small for traditional HR firms to work hard at placing a plumber. Automation is the key to unlocking the scale potential in this market – and early career guidance is the key to bringing large numbers of candidates to market.

Idea: Run My House – manage all your household services from a single app

MVP: Running your own house sucks – even if you outsource tasks like yard service, gutter cleaning, pest control, and cleaning, it’s still a challenge to deal with numerous service providers by inefficient means like phone calls. What if you had an app that enabled you to simply check off the service subscriptions you desire, and to take pictures to show problems needing resolution? Even when homeowners work with their existing service providers, there are major communication inefficiencies – not to mention the difficulty in acquiring good providers in the first place!

The difficulty with an MVP in the home services market is chiefly a business problem – a substantial percentage of home service work is performed in the informal economy, and as a result it’s highly fragmented. As a result this business is best attacked in a single test market to start, as providers need to be secured across all major services in order for homeowners to realize value in the service.

Market: The combined household market for home cleaning, yard service, pest control, gutter cleaning, and related scheduled services exceeds $100 billion per year, and including non-scheduledmaintenance the total market may exceed $500 Billion annually. This market is currently incredibly fragmented, in no small part because there are limited economies of scale in providing most of these services.

Unfortunately for the consumer, this leads to a terrible experience. If Run My House can capture a 10% fee for delivering volume to providers, while keeping the cost to consumers static, it should be possible to capture meaningful market share. With a total addressable market greater than $10B, there is true unicorn scale possible in this market.

Idea Score (0-10 scale): 7.5 points

Feasibility of MVP / Market Entry: 0.5

Building an MVP for RunMyHouse could be daunting, given the number of service providers that must be secured before the service becomes compelling. This sort of “full-stack” startup, providing a complete service rather than just software, has larger potential but also substantially greater risk and capital requirements. Typically it makes sense to attack individual metro areas individually, starting with a beta market and working through challenges there first.

A simpler alternate MVP might simply help homeowners organize communication with existing vendors – perhaps by providing the software for free, with vendors selling their services via the app. This Zenefits-style approach (the give-away-the-software part, not the HR disaster) could enable rapid expansion at lower cost.

Revenue Market Size: 4 (out of 4)

As noted above, the total market opportunity in the residential space is several hundred billion per year – a 10% take rate implies a true addressable market size of 20B+. Numerous public players in the home services and home sales space (ANGI, Z) point to the possibility of a unicorn valuation for a successful player.

Difficulty, Barriers to Entry, and Competition (out of 2): 1

A large scale b2c rollout of this sort would likely require substantial funding. HomeJoy was a substantial failure in this space, showing that giving away services at negative margins can take even well funded startups down. Handy, its largest competitor, has since worked hard to get to profitability, underscoring the risks of the home services market.

Taking a software-only approach could lower the risk of rollout, but substantial marketing spending would still be required to get customers and providers onboard.

Riding Hype or a Trend? 2

Bringing fragmented, illiquid, hundred-billion dollar markets online has been one of the key success stories of the last 20 years of the internet. Home services has been among the final frontiers because of its deep fragmentation, but Uber and ride-sharing proved that change will come to even the most glacial industries.

Idea: BestUse – analyze real estate through the lens of local zoning and code to determine best use, and identify underused properties

MVP: The process of identifying promising opportunities in real estate is largely a manual one today. Real estate investors and agents scour listings and property records to determine where opportunities to convert an old office into multifamily housing might exist, for example. BestUse would automate this process by using machine learning to compare zoning laws and potential uses to identify underutilized properties. A minimum viable product would involve targeting a particular metro area to analyze local zoning and building rules there in detail.

Market: BestUse has a likely path to market very similar to HiddenLevers (my current concern). The advantage of selling high value software in a niche market is that initial clients can be acquired very quickly after alpha release – the moment HiddenLevers portfolio stress testing worked in a minimal way for a professional audience, client acquisition amongst investment advisors began. With BestUse, real estate investors might quickly embrace a technology that enables them to identify “diamonds-in-the-rough”, properties currently languishing in a sub-optimal use.

The downside with this approach – the total addressable market tends to be limited: if real estate investors are willing to spend four to five figures per year for this capability, the total addressable market might be in the billion dollar range – enough to build a viable business, but not enough for a highly scalable growth path.

Idea Score (0-10 scale, up to 2 points per question): 6 points

Feasibility of MVP / Market Entry: 2

An MVP for BestUse would require a non-trivial initial effort to acquire needed real estate data and to plug in the appropriate analytics on local real estate codes. Actual market entry would likely follow a pattern similar to that for other niche analytics products – get in the hands of paying beta customers and iterate. This is a proven model with much lower risk than launching b2c oriented products.

Revenue Market Size or Eyeballs: 1

If the market is confined to analytics tools used by the commercial real estate industry, then the total addressable market is likely to be subscale (no unicorns here). A high margin $10M revenue business is possible, but getting past this to the next level is a key concern. Since the same sort of analytics is used in commercial real estate appraisal (an $8 billion market), adding this and related capabilities might push the scale a bit – but it’s not clear how to get to a $10B addressable market.

In a Growing Market? 0.5

The real industry is very mature, with growth rates unlikely to exceed the overall economy.

Difficulty, Barriers to Entry, and Competition 1.5

BestUse requires a combination of knowledge of real estate investing with technical modeling capabilities, providing a modest barrier to entry. The need to analyze zoning rules further raises the bar here.

Startups have started to appear in this space – Skyline is using similar analytics to partner invest in properties, an approach which might lead to greater overall market potential. Bowery Valuation is focused on automating real estate appraisals, a naturally related market.

Riding Hype or a Trend? 1

Applying advanced analytics and machine learning to any niche generates interest at the moment – but this is not a particularly innovative or new use case.

MVP: Eating within a diet’s guidelines is challenging for most, and is further complicated when eating out at restaurants. FMD solves this problem by detecting when a user is in a recognized restaurant, and showing only those menu options that meet their diet’s rules (the app would also show how to custom order at restaurants to stay within the diet). At launch the top 100 restaurant chains in America would be supported, representing the majority of all American restaurants – crowdsourcing additional restaurants and menu items should enable coverage to expand quickly from there. FMD will also enable the tracking and optimization of a user’s diet over the course of time – fall off track and the app will let you know what sorts of food choices would put you back on track for the rest of the day or week.

Market:

Roughly 15% of all Americans (45m people) are trying to follow a particular diet at any given time, with total spending in the diet and weight-loss industry exceeding
$33B last year. FMD could market the app toward existing diet providers in the space, as a management tool for their clients. FMD could also find a market in the management
of diabetes and other diseases where diet is an integral part of managing a long-term chronic disease.

With a large potential user b2c user base, freemium or advertising-based business models might make the most sense for FMD – but the possibility of a disease-management oriented approach remains open as well.

Idea Score (0-10 scale, up to 2 points per question): 4.5 points

(Overall this idea scored relatively poorly – I think pivoting it toward the health management space, perhaps diabetes or other food-related disease management, could strengthen the business case substantially)

Feasibility of MVP / Market Entry: 1

A substantial amount of restaurant menu data needs to be gathered and maintained in order to enable the app to function – but most of this is readily available and can be parsed online. With major restaurant chains commanding a huge market share in the restaurant industry, it should be possible to gather this data pre-launch in order to enable a functional product at launch.

Revenue Market Size or Eyeballs: 1

While the market size is large (as discussed above), advertising-supported products need to gain substantial scale in order to support a meaningful revenue stream. Since FMD is initially focused on helping dieters eat out, restaurants may be interested in sponsoring the app in order to drive traffic.

In a Growing Market? 1

The market for weight-loss and diet solutions is well established, and on the whole can no longer grow faster than single-digit growth rates. But the market for apps
that help manage diet-related diseases continues to grow rapidly, providing a strong potential growth niche.

Difficult, Barriers to Entry, and Competition 0.5

Numerous competitors exist in the diet app space, and apps even exist to find healthy restaurant options – but none attempt to analyze the mass market restaurant space. This is the opportunity for FMD – fast casual and similar restaurants can be hard to navigate for dieters, but it seems that there are no apps that attempt to solve this menu navigation process in a comprehensive way.

Riding Hype or a Trend? 1

Digital health apps, fitness trackers, and similar are a fast growing space. While diet-related apps operate at the edge of this space, the relationship may provide some halo for a business like FMD.